Growing a Business in a Recession

May 29, 2009

COLUMNBy MICHAEL S. MALONE

The great companies of high technology are at the starting line and waiting for the pistol to fire. When they come out of the blocks, it's going to be a dazzling sight … and our lives will change in the process.

Most of us see the current economic downturn as a particularly nasty recession -- one that, given Washington's current fiscal strategy, is likely to leave us with both a ton of debt and very slow, inflation-driven recovery. But for the electronics industry, driven by the unrelenting pressure of Moore's Law, downturns are merely interregnums between booms. They are a time for consolidating resources and staff, abandoning low-performing product and market ventures … and most of all, stealing the march on competitors by gearing up new products for the return of demand.

That's what's been going all over the tech world over the last year. While we've had our attention elsewhere, smart companies -- not to mention those firms that haven't been too distracted by plummeting sales -- have been gearing up for the next generation of products. Now, as they queue up in the months before the formal introduction of those products, we are starting to get some early -- and exciting -- glimpses of what that future will be.

To my mind, the single most important piece of technology news last year, though few people noticed, was Intel's announcement that it would continue to maintain its current level of R&D investment despite the recession. In other words, no matter what happened, Intel was going to keep Moore's Law moving forward. As CEO Paul Otellini told me when I interviewed him for the Wall Street Journal, he wasn't going to be the guy who had Moore's Law die on his watch.

Why was that important? Because what happens upstream in the world of chips sets the pace for everything that happens downstream in computers, smart phones, videogames, servers and, ultimately, in social networks, Google, Twitter, Facebook, etc.

Intel's gutsy decision to keep spending billions of dollars on new products when the rest of the world was tightening its belts meant that the company (if it didn't commit suicide in the process) would be perfectly positioned to own the semiconductor industry when the economy turned upward. [Indeed, if I was buying stock these days -- which I can't do as a journalist -- I'd seriously consider loading up on those guys.]

But, just as important, Intel's announcement provided those tens of thousands of downstream companies, big and small, the assurance that they could still plan for the future, extrapolating their future products out on the exponential curve of Moore's Law. That may not seem important, but in fact, in the digital age of which all of us are citizens, it is almost everything.

When you know the performance, price and size of the new generation of computational engines, you also know how small, how powerful, and how inexpensive you can plan to make your own products; what features you can add to your Web site or social network; and what level of experience you can bring to your online or video game.